De Bonis Non.
Donor Advised Funds.
Domestic Asset Protection Trusts.
Designated Beneficiary, especially relative to section 529 accounts. Death Benefit. Defined Benefit plan.
Doing Business As; i.e., fictitious business name.
Administrator De Bonis Non.
Designated Beneficiary Trust.
Defined Contribution plans.
Discounted Cash Flow; Distributable Cash Flow.
Discounted Distribution Model.
Disability Determination Services Division.
Refers to the prejudice of the common law to respect the wishes of the decedent who settled a trust for fiture generations. See Rule Against Perpetuities.
A rule which in some states bars testimony by an interested witness when the opposing party is dead.
Used to refer to federal estate tax and state inheritance and estate taxes.
Law providing a means to make changes to the administrative and dispositive provisions of an irrevocable trust. It makes use of the exercise of a trustee’s power to invade the principal of a trust to transfer assets to another trust for one or more of the beneficiaries of the original trust.
The person who died leaving an estate.
A trust which arises from within an inter vivos trust upon the death of the trustor/trustee.
Declaration of Trust
A document in which a person declares that they are establishing a trust. Also known as a Trust Agreement.
A judge’s determination of a party’s rights under a contract or statute.
A court order.
This is the amount the insured must pay of covered expenses before the insurer will pay. The purpose is to have the insured absorb more of the small claims, and thus become more conscious of the claims costs. Major medical plans as well as PPOs and POS have deductibles.
Types of deductibles include:
Carryover Deductible – This provision states that if the insured did not have enough in covered medical expenses to meet their own deductible they could take the medical expenses incurred in the last 3 months of the year and carry them into the next year.
Common Accident Deductible – This provision states that if several family members are in the same accident only one deductible applies.
Corridor Deductible – The deductible that must be paid once the basic plan benefits have been exhausted, before the supplemental major medical begins covering expenses.
Family – A family deductible can be one large deductible that the entire family’s covered medical expenses apply to. An older version: In a family, once 2 or 3 family members meet their own deductible this would satisfy the deductible requirement for the entire family for that year, and the remaining family members did not need to meet their deductible.
Flat or Calendar Year – Initial dollar amount of covered medical expenses that must be paid first before benefits begin. Once this amount is satisfied, benefits are paid regardless of the number of claims for policy period.
Integrated Deductible – Also used with supplementary major medical plans. Expenses covered by the basic plan will count toward satisfying the deductible on the major medical plan.
Per Cause – A deductible is applied to each covered person per accident, illness, or any claim for benefits.
Any thing which results in a decrease in the value of an estate. These are good because the lower the value of an estate the lower the tax burden.
A document that describes the transfer of ownership of real property. Types of deeds include: quitclaim deeds, grant deed, joint tenancy deeds, gift deeds, etc.
Deed of Trust
A deed which places legal tital in the hands of a trust trustee to secure (hypothecation) a loan.
Defective (Crummey) Trust
Trust combining provisions of an ILIT and an IDIT.
The word “defective” usually means that something is wrong. In the area of irrevocable trusts, however, making a trust “defective” can often make the trust much more effective. The use of the word here derives from the fact that, under a “defective” trust, all of the income tax consequences of the trust flow back to the grantor of the trust. Originally, this was considered to be a bad thing, hence the word “defective”, but in many situations, it is actually a good thing and can be used to great advantage.
It needs to be clearly understood that we are talking about a trust that is defective for income tax purposes but definitely not for estate tax purposes. This statement alone connotes the importance of careful drafting and implementation, because one of the primary purposes of an ILIT is to be free of estate taxes, and the last thing anyone wants is to defeat that purpose. Another name for a defective trust is a grantor trust, and these trusts are commonly referred to these days as “intentionally defective grantor trusts”.
Here are some examples of what can be accomplished with an intentionally defective grantor trust:
·Inforce policies can be sold to the trust rather than gifted, thereby avoiding the three-year estate re-inclusion rule. This removes the pressure of having the trust in place before the life insurance sale is completed. Since the grantor and the trust are considered to be one and the same for income tax purposes, the sale is deemed to be to the insured, thereby avoiding the transfer-for-value rule.
·Income producing property can be sold to the trust without income tax consequences, thereby producing income within the trust that can be used to pay premiums. Note that the income is taxed to the trust grantor so that all of the income is available to the trust. Note also that this is not considered to be an additional gift to the trust.
·Other transactions, such as loans, can be entered into between the grantor and the trust without income tax consequences to either.
Comes in many forms, such as qualified pension plans or stock option plans, that delay income taxation of salary or other forms of compensation for services, usually in a retirement benefit context. Often these are non-probate assets, similar to insurance, annuities, and other contractual arrangements, and may constitute income in respect of a decedent if the employee dies before receiving the benefit.
Often refers to diminished mental capacity.
An employer-sponsored qualified retirement plan in which the benefit that the retired employee will receive is defined as a specific dollar amount or a percentage of the employee’s compensation before retirement.
An employer-sponsored qualified retirement plan in which the contribution, not the benefit, is defined. Employers contribute to the plan on employee-participants’ behalf., and each employee has a separate account within the plan. Retiring or departing employees receive the balance of their accounts (subject to vesting), either in a lump sum or in some form of annuity. The amount employees receive is largely dependent upon investment performance. Examples include 401(k), IRA, and SEP plans.
Defined Value Clauses
A clause used in donative instruments that uses a defined value to effectuate a particular donative intent. The clause generally follows one of two forms – either as a savings clause or as a formula clause. Taxpayers use the clauses in an effort to avoid unanticipated transfer while still fully using the credits available to them under the transfer tax regime. Generally, a savings clause is one I a donative instrument designed to negate an undesired result arising out of other terms of the instrument or out of some other anticipated contingency. See Shirley D. Peterson, Savings Clauses in Wills and Trusts, 13 Tax Mgm’t Est., Gifts, & Tr. J. 83 (1988); A. Christopher Sega, Using Defined Value Clauses to Obtain Transfer Tax Certainty, 38 Inst. Est. Plan ¶ 801.1 (2004).
Defined Value Transfer (Provisions)
For hard-to-value assets, uncertainty regarding transfer taxes is a major risk. Well-advised taxpayers hire valuation experts to support their positions. A business or trophy property may hang in the balance. The IRS can and in some cases has taken aggressive positions not supported by an expert, particularly at audit. See, e.g., Estate of Dunn v. Commissioner, 301 F.3d 339 (5th Cir. 2002). Even at trial, expert opinions for the IRS can be extreme. In a valuation dispute, the taxpayer is sometimes able to make only one argument: that his appraiser’s valuation is correct.
Clients want better and more arguments. They are looking for a level of transfer tax certainty that is difficult to provide when transferring hard-to-value assets. In an effort to increase tax certainty, estate planners often use formula transfer clauses. With these clauses, the taxpayer possesses additional arguments to avoid the imposition of transfer tax.
Formula transfer clauses seek to limit transfer tax risk by (1) adjusting the property transferred or the consideration received based on values “finally determined for tax purposes” or (2) specifying the value of a property interest transferred.
In a line of cases going back to 1944, the IRS has experienced a measure of success in challenging certain types of formula clauses. But two recent taxpayer victories in cases involving dollar value formula clauses bring the issue to the forefront: Succession of McCord v. Commissioner, 461 F.3d 614 (5th Cir. 2006), and, more recently, Christiansen v. Commissioner, 130 T.C. No. 1 (2008).
Some Formulas Sanctioned by Treasury or IRS
Estate planners regularly use formula transfers. Some of these are sanctioned in the Treasury Regulations or in IRS pronouncements. As a taxpayer correctly argued to the Fifth Circuit:
Although the Government attempts to sidestep the point, the fact is that formula transfers are commonly used and specifically sanctioned in a number of lifetime and testamentary transfer situations to avoid the imposition of gift, estate, and generation-skipping transfer taxes. The standard unified credit bequest combined with a marital deduction bequest for the benefit of a surviving spouse is a common use of a value definition clause. The IRS specifically sanctioned these types of clauses in Revenue Procedure 64-19, 1964-1 CB 682. Likewise, a bequest of a transfer of unused federal generation-skipping transfer (“GST”) tax exemption is another common valuation definition clause. GST tax regulations specifically sanction using formula allocations of the GST tax exemption to ensure that a generation-skipping transfer is exempt from GST tax or that a generation-skipping trust has an inclusion ratio of zero. Treas. Reg. §§ 26.2632-1(b)(2)(ii) (lifetime transfers), 26.2632-1(d)(1) (testamentary transfers). The Treasury Regulations also specifically sanction disclaimers (unqualified refusals to accept property) using formula language—Example 20 of Treas. Reg. § 25.2518-3(d) delineates a fractional disclaimer amount with a numerator equal to the smallest amount that will allow the Estate to pass free of federal estate tax and a denominator equal to value of the decedent’s residuary estate. See also T.A.M. 8611004 (November 15, 1985).
Reply Brief of Appellants, Succession of McCord v. Commissioner, No. 03-6070, at 7–8.
Other sanctioned formulas involve GRATs and charitable trusts. To be a “qualified interest” under Code § 2702, a GRAT annuity must convey “the right to receive fixed amounts payable not less frequently than annually.” The Regulations indicate that “[a] fixed amount means . . . [a] stated dollar amount . . . or [a] fixed fraction or percentage of the initial fair market value of the property transferred to the trust, as finally determined for federal tax purposes.” Treas. Reg. § 25.2702-3(b)(1)(ii). The Regulations further state that “[i]f the annuity is stated in terms of a fraction or percentage of the initial fair market value of the trust property, the governing instrument must contain provisions meeting the requirements of Treas. Reg. § 1.664-2(a)(1)(iii) of this chapter (relating to adjustments for any incorrect determination of the fair market value of the property in the trust).” Treas. Reg. § 25.2702-3(b)(2). The Regulations governing charitable remainder annuity trusts provide as follows:
The stated dollar amount may be expressed as a fraction or a percentage of the initial net fair market value of the property irrevocably passing in trust as finally determined for Federal tax purposes. If the stated dollar amount is so expressed and such market value is incorrectly determined by the fiduciary, the requirement of this subparagraph will be satisfied if the governing instrument provides that in such event the trust shall pay to the recipient (in the case of an undervaluation) or be repaid by the recipient (in the case of an overvaluation) an amount equal to the difference between the amount which the trust should have paid the recipient if the correct value were used and the amount which the trust actually paid the recipient. Such payments or repayments must be made within a reasonable period after the final determination of such value.
Treas. Reg. § 1.664-2(a)(1)(iii).
Adjustment Clauses and IRS Challenges to Them
A formula adjustment clause can be one of two types. One type provides that if the finally determined value of transferred property exceeds a specific dollar amount, the size of the transferred interest is reduced to correlate to the amount. The other type requires the transferee to return consideration to the transferor equal to the difference in values.
The IRS believes such clauses should be ignored, asserting that the provisions are void as against public policy because the condition subsequent renders any IRS challenge meaningless. The Fourth Circuit considered a formula adjustment clause in Commissioner v. Procter, 142 F.2d 824 (4th Cir. 1944). In Procter, the taxpayer provided that, if any part of the transfer was subject to tax, the property subject to tax would be deemed excluded from the transfer (and thus returned to the taxpayer). The Procter court held that the clause did not eliminate the taxable gift because it imposed a condition subsequent violative of public policy and would be “trifling with the judicial process” in a way that would inhibit tax collection, because attempts to enforce the tax would defeat the gift and would require the court to pass on a tax issue rendered moot by the court’s decision itself.
Similarly, in Ward v. Commissioner, 87 T.C. 78 (1986), the taxpayer made a gift of stock, reserving the right to revoke the gift to the extent the value was finally determined for gift tax purposes to exceed a certain amount. The Tax Court rejected the power of revocation, holding that the clause violated public policy under a Procter analysis. The Tax Court also has ignored adjustment clauses in Harwood v. Commissioner, 82 T.C. 239 (1984), aff’d, 786 F.2d 1174 (9th Cir. 1986), and Estate of McLendon v. Commissioner, 66 T.C.M. (CCH) 946 (1993), rev’d on other grounds, 77 F.3d 477 (5th Cir. 1995).
Taxpayers, however, were not without a court victory even before McCord and Christiansen. In King v. United States, 545 F.2d 700 (10th Cir. 1976), the taxpayer sold stock to trusts, providing for a purchase price adjustment if the finally determined value was higher that the stated price. The King court distinguished Procter, noting that the sole purpose of the Procter clause was to rescind the transaction, whereas the price adjustment clause in King did not affect the “nature” of the transaction. The court added that “an attempt to avoid valuation disputes with the IRS agents by removing incentive to pursue such questions is not contrary to public policy in the absence of a showing of abuse.” The IRS later took a view opposed to King in Rev. Rul. 86-41, 1986-1 C.B. 300.
Defined-Value Transfers by Gift— McCord
In McCord v. Commissioner, 120 T.C. 358 (2003), the taxpayers made a gift of an 82% limited partnership interest to their sons, to trusts for the benefit of their children and grandchildren, and to two charities. Under the Assignment Agreement, the sons and the trusts collectively received a portion with a fair market value of $6.9 million; the remaining portion passed to the charities. The taxpayers left it to the donees to determine how the interest should be divided consistent with this dollar value formula. Three months after the transfers, the donees reached an agreement (the “Confirmation Agreement”) in which the charities accepted a 5.1% interest. Six months later, the partnership redeemed the charities’ interests for cash.
The IRS challenged the transaction under the substance-over-form doctrine, public policy considerations, and the integrated transaction doctrine. The majority of the Tax Court did not rely on the IRS’s arguments in refusing to respect the formula clause. Instead, the majority interpreted the transaction as if the McCords had given the interests as agreed on by the donees in the Confirmation Agreement and ignored the dollar value formula in the Assignment Agreement. The majority allowed a charitable deduction equal to its determined value of the 5.1% interest.
Judges Chiechi and Foley (the trial judge) concurred in part and dissented in part. They believed the Assignment Agreement should govern the property rights transferred and the value of the gift to the taxable donees was the amount specified in the Assignment Agreement.
Judges Laro and Vasquez dissented. They would have allowed a charitable deduction only for the amount received by the charities in the redemption, based on the IRS’s arguments.
The Fifth Circuit reversed the majority’s decision in Succession of McCord v. Commissioner, 461 F.3d 614 (5th Cir. 2006). The Fifth Circuit emphasized that the fair market value of the interests transferred must be determined on the date of the gift:
The Majority’s key legal error was its confecting sua sponte its own methodology for determining the taxable or deductible values of each donee’s gift . . . . This core flaw in the Majority’s inventive methodology was its violation of the long-prohibited practice of relying on post-gift events. Specifically, the Majority used the after-the-fact Confirmation Agreement to mutate the Assignment Agreement’s dollar-value gifts into percentage interests in MIL. It is clear beyond cavil that the Majority should have stopped with the Assignment Agreement’s plain wording. By not doing so, however, and instead continuing on to the post-gift Confirmation Agreement’s intra-donee concurrence on the equivalency of dollars to percentage of interests in MIL, the Majority violated the firmly-established maxim that a gift is valued as of the date that it is complete; the flip side of that maxim is that subsequent occurrences are off limits.
Id. at 626. Thus, like Judges Chiechi and Foley, the Fifth Circuit focused on the interests transferred in the Assignment Agreement, not the percentage interests later agreed to by the donees in the Confirmation Agreement.
The Fifth Circuit did not address the IRS’s public policy argument under Procter, observing that the IRS had waived the argument by failing to brief it. Id. at 623. In the very same sentence, however, the court noted that instead of asserting its public policy and related arguments, the Commissioner has “instead—not surprisingly—devoted his efforts on appeal solely to supporting the methodology and holdings of the Majority” of the Tax Court. Id. (In the authors’ view, this language indicates that the Fifth Circuit did not think much of the IRS’s Procter argument in the context of the McCord facts.)
Two additional McCord-style cases are currently pending before the Tax Court: Hendrix v. Commissioner, No. 10503-03; and Rosenbaum v. Commissioner, No. 13028-03.
Defined-Value Transfers at Death— Christiansen
Christiansen v. Commissioner, 130 T.C. No. 1 (2008), concerned a defined-value disclaimer. The decedent left her estate to her daughter. Under the will, 75% of any disclaimed assets would pass to a charitable lead annuity trust (CLAT) and 25% to a private foundation (the “Foundation”). The principal assets of the estate were 99% limited partnership interests in two partnerships. The daughter disclaimed a fractional share of the estate exceeding $6.35 million, based on values “as finally determined” for estate tax purposes.
The IRS challenged both the valuation of the partnership interests and the effect of the formula disclaimer on the size of the charitable deduction the estate was entitled to receive. Before trial, the parties reached agreement on the values of the limited partnership interests. The agreement increased the gross estate from 6.51 million to $9.6 million and increased the value of the properties passing to the CLAT and the Foundation. The issue for the court was whether a charitable deduction would apply to the additional value passing to charity.
A majority of the Tax Court held that the disclaimer was not qualified for the 75% passing to the CLAT because the daughter was a contingent remainder beneficiary of the CLAT. Judge Swift and Judge Kroupa (the trial judge) dissented from this portion of the opinion. Both believed the disclaimer was qualified.
Regarding the 25% passing to the Foundation, the Tax Court unanimously validated the formula disclaimer and allowed a charitable deduction. The court noted that the transfer was the result of a disclaimer governed by Treas. Reg. § 20.2055-2(c), which relates back to the decedent’s death as if it had been part of the will. The court also stated:
The regulations speak of the contingency of “a transfer” of property passing to charity. The transfer of property to the Foundation in this case is not contingent on any event that occurred after Christiansen’s death (other than the execution of the disclaimer)—it remains 25 percent of the total estate in excess of $6,350,000. That the estate and the IRS bickered about the value of the property being transferred doesn’t mean the transfer itself was contingent in the sense of being dependent for its occurrence on a future event. Resolution of a dispute about the fair market value of assets on the day Christiansen died depends only on a settlement or final adjudication of a dispute about the past, not the happening of some event in the future. Our Court is routinely called upon to decide the fair market value of property donated to charity—for gift, income, or estate tax purposes.
130 T.C. No. 1, at 30. The court rejected the IRS’s public policy argument, noting that it was “hard pressed to find any fundamental public policy against making gifts to charity—if anything the opposite is true. Public policy encourages gifts to charity, and Congress allows charitable deductions to encourage charitable giving.” Id. at 32–33. Rejecting the IRS’s Procter analogy, the court noted:
This case is not Procter. The contested phrase would not undo a transfer, but only reallocate the value of the property transferred among Hamilton, the [CLAT], and the Foundation. If the fair market value of the estate assets is increased for tax purposes, then property must actually be reallocated among the three beneficiaries. That would not make us opine on a moot issue, and wouldn’t in any way upset the finality of our decision in this case.
Id. at 33–34. The court added that a charity’s directors, as well as executors of an estate, owe fiduciary duties that are enforceable by the IRS and the state’s Attorney General.
Planning Issues Generally
Although sound arguments exist for a taxpayer to assert that the public policy holding in Procter and its progeny should not be followed in today’s world given the broad approval granted to a variety of formula clauses in IRS pronouncements, practitioners should be cautious when using adjustment clauses that cause property to be returned to the donor (or deemed never transferred) similar to those used in Procter and Ward. Defined-value planning, however, involves a different structure than addressed by the courts in Procter and its progeny because no condition subsequent is present.
Practitioners should be aware that the charitable techniques of McCord and Christiansen are different from each other in terms of the effect of a successful IRS challenge to value. A McCord-type of defined-value formula (a transfer of interests of a specific dollar value to noncharity donees with the remainder to charity, not based on values as finally determined for transfer tax purposes) turns on the state law property rights transferred. If, after the transfer, the donees reach an arm’s length agreement regarding the allocation of the interests among themselves under the formula, a successful IRS challenge to the value of the interests transferred does not change that allocation. On the other hand, a Christiansen-type of defined-value formula (a transfer of interests of a specific dollar amount to noncharity donees with the remainder to charity, based on values as finally determined for transfer tax purposes) is affected by a successful IRS challenge to the value of the interest transferred. Under that type of a clause, if the value of the interest transferred is increased, the size of the interest passing to charity is likewise increased. That increase applies for state law purposes whether or not an additional charitable deduction is ultimately allowed.
For a McCord-type of defined-value formula, both the IRS and the courts will examine any pre-transfer dealings with the charity. It is important for the taxpayer to be able to demonstrate that the transaction with the charity was at arm’s length and that there was no pre-arranged deal between family members and the charity providing that the charity would receive a specific interest in the entity transferred. As the Fifth Circuit noted in McCord:
Neither the Majority Opinion nor any of the four other opinions filed in the Tax Court found evidence of any agreement—not so much as an implicit, “wink-wink” understanding—between the Taxpayers and any of the donees to the effect that any exempt donee was expected to, or in fact would, accept a percentage interest in MIL with a value less than the full dollar amount that the Taxpayers had given to such a donee two months earlier.
McCord, 461 F. 3d at 620. In this regard, it is also helpful for the charity to have its own counsel review the transaction and, if the charity deems appropriate, obtain its own valuation analysis.
Testamentary vs. Inter Vivos Transfers
With testamentary defined-value transfers involving charities, it is often difficult to set a formula in the will because the value of the estate is a moving target. Thus, clients may prefer dollar value formula disclaimers like the one used in Christiansen. This type of formula allows, but does not require, the children to disclaim assets to a charity selected by the decedent in his or her will.
Charitable disclaimer planning like Christiansen generally requires all beneficiaries of the estate to act together. If all do not disclaim, the defined-value structure will have a “leak” that leads to estate tax if valuation is successfully challenged by the IRS, because not all of the increase in value passes to charity. Careful consideration should also be given to the drafting of debts, expenses, and tax allocation provisions, because the boilerplate of many wills simply allocates those obligations to the residue of the estate.
Noncharitable Defined-Value Transfers (Briefly)
For clients without the requisite charitable intent, or worried about family members negotiating with the charity over the percentage interests received by each donee in a McCord-type transaction, a defined-value transfer using a GRAT might be considered. The structure would consist of a transfer of interests equal to a specific dollar amount to non-GRAT donees, with the remainder passing to a GRAT based on values as finally determined for transfer tax purposes. In the event of a successful valuation challenge by the IRS, the increased value would result in a larger transfer to the GRAT and, as required by Code § 2702, increase the annuity owed to the donor. This type of transaction is similar to the consideration adjustment structure used in King. The difference is that, in a King transaction, the property transferred to each recipient does not shift as it would in the case of a GRAT; rather, the amount the recipient is required to pay is based on the value of the property as finally determined for transfer tax purposes. What might make the GRAT more desirable than the consideration adjustment provision in King is that the Regulations under Code § 2702 offer some comfort if faced with a Procter argument. In addition, if the GRAT is not a “zeroed-out” GRAT, a successful IRS challenge would result in some additional tax being due, which would make it difficult for the IRS to argue, as it did in Procter, that the clause violated public policy.
Although the decisions in McCord and Christiansen provide guidance about formula clauses that will be respected by the courts, the IRS will continue to assert that formula clauses outside those specifically sanctioned in its pronouncements violate public policy and should not be respected. Careful consideration should be given to the type of clause used, the effect of any value adjustment, and the client’s desire for finality regarding the allocation of transferred property.
Delaware Tax Trap
A means of avoiding Generation Skipping Transfer Taxes. Consult Blattmachr & Pennell, Using ‘Delaware Tax Trap’ to Avoid Generation-Skipping Taxes, 68 J Tax’n 242 (1988).
The right of a beneficiary to withdraw property transferred to an irrevocable trust. Used to convert a future-interest gift to a present-interest gift so that the gift qualifies for the gift tax annual exclusion.
Is one of a particular assets or source of funds but, if that source is inadequate, from other funds, such as “$100, to be satisfied first from the balance of my account at the XYZ bank.” It is essentially a combination of Specific and General bequests.
In California and for insurance purposes, a dependent is defined as an insured’s spouse, an unmarried child from birth to age 20 (24 if in school), or a child 21 years old or older if incapable of employment due to a mental or physical handicap.
Dependent Relative Revocation
A doctrine which can undo a revocation of a will. In a case where will #2 revokes will #1, but where will #23 is invalid. Dependent Relative Revocation occurs when will #2 was never valid to begin with or does not properly effectuate the testator’s inent. Will #1 is “unrevoked.”
Usually refers to mental aberrations versus diminished capacity.
The passage of real property upon the death of its owner.
(1) Real property transferred under the terms of a will; or (2) any real or personal property transferred under the terms of a will.
Person or entity who receives a devise under the terms of a will.
Duty Free Shopper.
Defective Grantor Trust.
California Department of Health Care Services.
Department of Health and Human Services.
Department of Human Resources.
Department of Homeland Security.
Disability Income rider.
Disability Insurance Benefit.
Delaware INcomplete Gift non-grantor trust; Delaware Incomplete Non-Grantor trust.
Department of Industrial Relations.
Disability Insurance Record System.
Permanent: one that reduces or eliminates one’s ability to work for the remainder of one’s life.
Permanent and Total: Unable to any work, and there is no recovery.
Permanent Partial: Earning capacity impaired for life.
Presumptive: Disability which is deemed total even when some work may be possible. Results for total blindness, ;oss of speech, loss of two limbs, or total deafness.
Residual: Insurance protects income paying proportionate benefits to insured who is working at a reduced earnings due to a disability.
Temporary: one that reduces or eliminates one’s ability to work while recovering from an illness or injury.
Temporary Partial: Work capacity impaired while recovering.
Temporary Total: Unable to do any work while recovering.
Insurance that provides income to an individual if he or she becomes disabled. The disability income paid is based on the premium paid, the insured’s age, occupation, and health.
Domestic International Sales Corporation.
A court order releasing the administrator or executor from any further duties regarding an estate.
A refusal to accept a gift or inheritance. Also known as renunciation.
Disclaimer of Property Interests Act
See Uniform Disclaimer of Property Interests Act.
A trust that has embedded provisions (usually contained in a will) which allow a surviving spouse to put specific assets under the trust by disclaiming ownership of a portion of the estate. Disclaimed property interests are transferred to the trust, without being taxed.
Provisions can be written into the trust that provide for regular payouts from the trust to support survivors. Surviving minor children can also be provided for, as long as the surviving spouse elects to disclaim inherited assets, passing them on to the trust.
For example, if an individual passes away and leaves her husband an estate, he may disclaim some interests in the estate, which are then passed directly to the trust as though it were the original beneficiary. Minor children could then benefit from regular payouts from the trust.
Disclaimer trusts require that the survivor act according to the wishes of the deceased, and disclaim ownership of some of the assets bequeathed to him by the deceased. In the above example, if the surviving spouse does not disclaim ownership of any portion of the estate, then the deceased’s wish to transfer assets to the surviving minor children goes unfulfilled. Because of the legal complexities involved, these trusts should only be set up by qualified professionals.
Discounts reduce the value of a gift for estate and gift tax purposes. Discounts also apply in business planning in valuing a business for sale. Types of discounts include lack of marketability, lack of control or minority interest, and key person.
A trust that allows the trustee to decide “in its discretion” how much to distribute to the beneficiaries from time to time.
To leave a legal heir out of your estate plan.
Loss, or loss of use, of specified members of the body (limbs) resulting from accidental bodily injury. Some policies require actual severance of the limb from the body; others will cover total loss of use of the limb. Some health insurance policies also classify total loss of sight or total loss of hearing as being covered. These are AD&D polices.
A person who, under law, if named a trust beneficiary will invalidate said trust. In California this includes: (1) drafters of donative transfer documents and persons closely associated with those drafters, and (2) a care custodian of a transferor who is a dependent adult.
Under the Uniform Probate Code is the authority for a court to admit a will to probate notwithstanding that it lacks certain formalities.
Person or entity which receives property from an estate. See Next of Kin.
Operates as a partial revocation by operation of law of dispositive provisions in favor of the former spouse and sometimes the spouse’s relatives. It may revoke the entire document.
Do It Yourself.
Discount for Lack Of Marketability. A concept used in the evaluation of the value of a privately held asset for tax purposes.
Discount for Lack Of Marketability.
Department of Motor Vehicles.
Designated Non-Financial Business and Profession.
Distributable Net Income. Defined in IRC §643(a).
Do Not Resuscitate.
Dead on Arrival. Department on Aging.
Doctrine Of Infectious Invalidity
Is part of the result of violating the Rule Against Perpetiities that may invalidate otherwise valid interests that are closely tied to invalid interests.
Doctrine Of Worthier Title
Converts a reversion to the heirs of the transferor into a remainder to the transferor.
Date of Death.
Department of Insurance.
Department Of Justice.
Department of Labor.
Defense Of Marriage Act.
One of two persons who together have filed a Declaration of Domestic Partnership with the Secretary of State.
The place where a person permanently resides, even though he may not spend all or even a majority of his time there.
A person or entity who or which receives a gift.
Person who, or an entity which, gives property to another while alive, or in existence.
Dangers, Opportunities, Strengths.
Deed Of Trust. Department Of Transportation.
The provision which the law makes for a widow out of the lands or tenements of her husband, for her support and the nurture of her children. A type of life-estate which a woman has by right of law to claim on the death of her husband in the lands and tenements of which he was seized in fee during the marriage. See Inchoate Dower.
Durable Power of Attorney for Financial management.
Due Process in Competence Determination Act. Prob. C. §§810-813, 1801, 1881, 3201, 3204.
Durable Power Of Attorney.
Department of Public Social Services (Los Angeles County).
Deficit Reduction Act of 1984.
Designated Roth Account.
Deduction with Respect to a Decedent.
Dread Disease Policy
A limited health policy that provides coverage only for a certain specified disease such as cancer. It is designed to supplement your health insurance policy, not replace it.
Dealer’s Record of Sale as relates to firearms.
Dependent Relative Revocation.
Is a trust with no remaining corpus and that therefore will terminate.
Disproportionate Share Hospital.
Deceased Spouse’s Unused Exemption/Exclusion.
Deceased Spouse’s Unused Exemption/Exclusion Amount.
Dual Choice Plans
When an employer offers employees a choice in health plans, such as offering both an HMO and a PPO.
Dual Choice Provision or Law
Passed in 1977 and expired in 1995. It required employers who provided health care benefits with 15 or more employees to offer a federally certified HMO as a choice if there was an HMO in their area.
Duplicate Original Wills
Are multiple copies each executed with the requisite formalities.
A power of attorney which does not terminate when the principal becomes incompetent.
Durable Power of Attorney
If a power of attorney is a “durable” power, it must be in writing, and, unlike a power that is not a durable power, the right to act under the durable power continues even though the person giving the power has become legally incompetent. A power of attorney, whether durable or not, expires on the giver’s death.
Durable Power of Attorney Act
Law establishing rights, powers, and requirements of durable powers of attorney. Laws regarding general durable powers of attorney can be found at California Probate Code sections 4650 and 4700 et seq.
Durable Power Of Attorney For Finances
A legal document designating the person or entity to manage the finances of its creator in the event the creator becomes incapacitated, which specifies the powers and responsibilities granted this attorney.
Domestic Violence Prevention Act.
Domestic Violence Restraining Order.
Domestic Violence Restraining Order System.
Dangerous Weapon Permit.
Also known as generation-skipping transfer tax planning or multigenerational planning. Extending the benefits of an estate plan beyond children to grandchildren, great grandchildren, etc.
An irrevocable trust intended to last (and grow) for several generations after the settlor (in some states, forever), bypassing estate taxes in each successive generation. See Generation-Skipping Trust; and Rule Against Perpetuities.